Do you keep extra money available for investing

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Mr.BB
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Do you keep extra money available for investing

Post by Mr.BB » Sun May 21, 2017 12:27 pm

Does anyone keep available cash (checking/roth - money market)/ (Not emergency fund money) in case any fund you want suddenly goes on sale after a market correction or pullback? Or are you 100% in at all times?
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miamivice
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Re: Do you keep extra money available for investing

Post by miamivice » Sun May 21, 2017 12:34 pm

That's called market timing, which is something Jack Bogle (and hence Bogleheads) do not agree with.

Jack Bogle's advice is to buy a little each month over time (dollar cost averaging) whether the market goes up or down, and in the long run one should come out ahead.

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KlingKlang
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Re: Do you keep extra money available for investing

Post by KlingKlang » Sun May 21, 2017 12:35 pm

I keep about 15% of my financial assets in cash (plus emergency funds), so it's available for major expenses which could theoretically include investing. Its not just sitting around in a brokerage account waiting for a hot stock deal.

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BolderBoy
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Re: Do you keep extra money available for investing

Post by BolderBoy » Sun May 21, 2017 12:36 pm

Mr.BB wrote:Or are you 100% in at all times?
100% all the time.
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David Jay
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Re: Do you keep extra money available for investing

Post by David Jay » Sun May 21, 2017 12:46 pm

I have about 40% of my portfolio available for investing in equities in the event the market goes down. I keep it in my brokerage account in a fund called "Total Bond Fund". In the event of a significant stock downturn I will exchange some of the Total Bond fund holdings for Total Stock Fund holdings. The size of the exchange is the amount necessary to make equities 60% of my portfolio.
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badger42
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Re: Do you keep extra money available for investing

Post by badger42 » Sun May 21, 2017 12:49 pm

I keep fully invested, but am in the accumulation phase and use incoming funds to buy whatever is 'down' relative to my target allocations.

livesoft
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Re: Do you keep extra money available for investing

Post by livesoft » Sun May 21, 2017 12:52 pm

You know, that's what your bond allocation is for. Bonds were UP about half a percent on last week's dump, so you made more than cash before you exchanged into equities and watched those equities POP.

And then you rebalanced back into bonds on Friday.
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Sandtrap
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Re: Do you keep extra money available for investing

Post by Sandtrap » Sun May 21, 2017 12:58 pm

Yes :D

dbr
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Re: Do you keep extra money available for investing

Post by dbr » Sun May 21, 2017 1:02 pm

No :D

fundseeker
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Re: Do you keep extra money available for investing

Post by fundseeker » Sun May 21, 2017 1:16 pm

livesoft wrote:You know, that's what your bond allocation is for.
This is the best answer, based on my many years on this forum. However, I have maybe 20% of my portfolio in money markets just waiting on the correction. I have all of this cash in large part because of reports on this forum and elsewhere that bonds were going to drop as soon as rates went up. Well, for several years rates never went up and I missed out on some bond returns. My fault of course, but I am not putting that large amount of cash into bonds now, since rates are finally going up. I am going to hold off and buy add to my stock funds when they come down. Also, many months ago I set my TSP to only buy G Fund, not stocks. At the right time, I will do an interfund transfer to the C,S, and I.

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bligh
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Re: Do you keep extra money available for investing

Post by bligh » Sun May 21, 2017 1:24 pm

In tax deferred the answer is no. It is 100% invested and the only time I buy a 'dip' (stocks or bonds) to rebalance to my target allocation.

In taxable, the answer is yes. I keep cash reserves (these reserves not only include my emergency fund, but any known upcoming large expenses and such other things) that are usually larger than I need. I have used these cash reserves in the past to "buy the dips". However, that money has then never left the portfolio. I suppose what I am doing is using my cash reserves to take an advance on future cash flows that would have been invested anyway.
Last edited by bligh on Sun May 21, 2017 1:29 pm, edited 2 times in total.

menlo
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Re: Do you keep extra money available for investing

Post by menlo » Sun May 21, 2017 1:27 pm

I have 5-10% of my portfolio value in cash at any given time although it's mostly because I allow cash to accumulate and then lumpsum invest it at a later date in order to re-balance. It's not ideal - it acts like a highly liquid negative yield bond - but I view it as a relatively small issue in the big scheme of things and I like the liquidity in case of unexpected events. But I really should keep it closer to 2-3% of portfolio value in order to avoid unnecessary drag.

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Phineas J. Whoopee
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Re: Do you keep extra money available for investing

Post by Phineas J. Whoopee » Sun May 21, 2017 3:07 pm

All my funds that were available for investment are invested, per my chosen asset allocation. A couple of years later I answered some questions about it.

25% Total US Stock; 15% Total International Stock; 40% Inflation-protected Fixed Income; 20% Nominal Fixed Income.

If I kept, for example, 20% in a savings account hoping to invest it later, spread evenly across my chosen asset classes my allocation would be:

20% Cash; 20% Total US Stock; 12% Total International Stock; 32% Inflation-protected Fixed Income; 16% Nominal Fixed Income; except that works out to 32%/68% which may be enough different from 40/60 to change the outcome. Furthermore, 36% of my portfolio would be in nominal fixed income, and only 32% inflation-protected, which is not in line with my own analysis of my inflation risk.

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John Z
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Re: Do you keep extra money available for investing

Post by John Z » Sun May 21, 2017 3:26 pm

No, 100% invested always.
Hey, does this sound like another p-o-l-l
:P

GoldenFinch
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Re: Do you keep extra money available for investing

Post by GoldenFinch » Sun May 21, 2017 3:34 pm

Not really. :D

SimplicityNow
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Re: Do you keep extra money available for investing

Post by SimplicityNow » Sun May 21, 2017 3:36 pm

Besides our emergency fund not really. Every 4-6 weeks, when one of our savings accounts gets to a certain dollar value, we will purchase some VTSAX or VTIAX according to our asset allocation. This is independent of whatever the market is doing that day or week.

We aren't market timers. As Jack Bogle would say: I'm an indexer.

BW1985
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Re: Do you keep extra money available for investing

Post by BW1985 » Sun May 21, 2017 3:40 pm

This is often called dry powder around here.

Our emergency fund in extra large and yes I do consider some of that dry powder.
Last edited by BW1985 on Sun May 21, 2017 3:40 pm, edited 1 time in total.
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badbreath
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Re: Do you keep extra money available for investing

Post by badbreath » Sun May 21, 2017 3:40 pm

100% invested. I don't know if I am buying at a high or a low but I know I am invested.
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itstoomuch
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Re: Do you keep extra money available for investing

Post by itstoomuch » Sun May 21, 2017 3:45 pm

yes & no.
We have a pure Discretionary Investment bucket. Currently about 70% cash. It's fully invested. Sometimes it's fully in stocks. Sometimes not.
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Dottie57
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Re: Do you keep extra money available for investing

Post by Dottie57 » Sun May 21, 2017 3:48 pm

No. :D

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Earl Lemongrab
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Re: Do you keep extra money available for investing

Post by Earl Lemongrab » Mon May 22, 2017 5:20 pm

I'm not supposed to, but I can be a bit of a procrastinator so cash will accumulate. I have about 20k that needs to be invested now, but that's only about 1% of portfolio these days.
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wolf359
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Re: Do you keep extra money available for investing

Post by wolf359 » Mon May 22, 2017 6:38 pm

Well, I have a spending fund that we use to save up for vacations or a replacement car. If the market tanked significantly, we'd consider putting off our spending goals and invest. This requires my DW to agree. If our jobs also got shaky, the money would stay as cash if we thought it might be needed for survival.

So, technically no, but I have some pools of money I could tap.

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DaftInvestor
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Re: Do you keep extra money available for investing

Post by DaftInvestor » Mon May 22, 2017 8:52 pm

livesoft wrote:You know, that's what your bond allocation is for.
+1
years ago I used to keep some "dry powder" as I've heard folks here refer to it as but then I realized:
1) that by simply re-balancing regularly I'm buying on the lows anyway (and I have more money in bonds earning more than cash in an account).
2) keeping "dry powder" is simply trying to time the market - which won't work. Some people have been waiting 8 or 9 years for another big-dip which hasn't come and missed out on years of good growth.

aristotelian
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Re: Do you keep extra money available for investing

Post by aristotelian » Mon May 22, 2017 9:25 pm

I invest every penny. Stocks for bull markets, bonds for bear markets. If the market is down, I rebalance from bonds. I do not see the point of holding cash except to buy stuff, and I like to buy a little stuff as possible.

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Dale_G
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Re: Do you keep extra money available for investing

Post by Dale_G » Mon May 22, 2017 9:39 pm

My really dry powder (cash equivalents) amounts to 0.5% of the portfolio. But I keep that only so I don't have to bother reconciling the checking account or pay any attention to credit card purchases.

Otherwise I am fully invested. In the event that equities decline about 16% from here (and lower thereafter), money will move from bonds to equities. Market timing has never worked for me, and I see no evidence that it has consistently worked worked for anyone else.

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Longtermgrowth
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Re: Do you keep extra money available for investing

Post by Longtermgrowth » Tue May 23, 2017 11:38 pm

livesoft wrote:You know, that's what your bond allocation is for. Bonds were UP about half a percent on last week's dump, so you made more than cash before you exchanged into equities and watched those equities POP.

And then you rebalanced back into bonds on Friday.
I've been wondering what the ideal bond ETF would be for such an event (or maybe more of a bear market); say a separate bond ETF used with a slice of fixed income. I've seen some mention EDV (Vanguard Extended Duration ETF), but not sure it would be the best idea with rising interest rates :confused

OP: I have 5 years of expenses in emergency fund (1% savings account that I view as being similar to short term treasuries) that needs to be moved to stocks, along with 7 years expenses in a CD with a reasonable early withdrawal penalty that I may break if stocks are priced at a tempting enough level. If stocks aren't at a tempting enough level by the time it matures, it really needs to be put into stocks at that time anyway :oops:

livesoft
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Re: Do you keep extra money available for investing

Post by livesoft » Wed May 24, 2017 7:40 am

Longtermgrowth wrote:
livesoft wrote:You know, that's what your bond allocation is for. Bonds were UP about half a percent on last week's dump, so you made more than cash before you exchanged into equities and watched those equities POP.

And then you rebalanced back into bonds on Friday.
I've been wondering what the ideal bond ETF would be for such an event (or maybe more of a bear market); say a separate bond ETF used with a slice of fixed income. I've seen some mention EDV (Vanguard Extended Duration ETF), but not sure it would be the best idea with rising interest rates :confused:
One has to put aside the idea that there is an "ideal" anything. One has to accept that one is going to lose money on something some of the time. Once that ideal idea is embraced, then it is liberating. We have only two (2) bond funds now: Total US Bond market index in various renditions, and Short-term corporate bond index. (We also have some legacy TIAA traditional annuity.) If we want to buy equities on a dip, then we sell some bond fund shares whether they have gone up, gone down, or stayed the same.
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jedblanks
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Re: Do you keep extra money available for investing

Post by jedblanks » Wed May 24, 2017 8:47 am

yes, but not like you think. My other money is for investing in things that will return some value in cash and some value in life experience/fun.

These material possessions usually results in a 10-50% loss in the cash and indeterminate return on LE/Fun.

Dandy
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Re: Do you keep extra money available for investing

Post by Dandy » Wed May 24, 2017 9:49 am

I have always looked at my allocation as having equities/bonds/cash. There was always a decent liquid assets amount to access for stability, emergencies and opportunities. Expenses are lumpy so it was nice to have some safe/liquid assets to tap when needed.

Opportunities sometimes present themselves and it is nice to have those assets available. Sometimes the opportunity might be to buy a bit extra when the equity market plunges or to upgrade your mattress when there is a sale. Once my friend's dad passed away and I had an opportunity to buy a almost brand new car at a great price.

Sure you could always sell bonds or equities and pay some taxes but sometimes the dual role of cash as providing stability and easy/quick opportunity is overlooked. But, the intent of the cash allocation was not expressly for buying equities when they decline.

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ruralavalon
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Re: Do you keep extra money available for investing

Post by ruralavalon » Wed May 24, 2017 10:20 am

Mr.BB wrote:Does anyone keep available cash (checking/roth - money market)/ (Not emergency fund money) in case any fund you want suddenly goes on sale after a market correction or pullback? Or are you 100% in at all times?
No, I never have kept a cash hoard for Investing. I have stayed 100% invested at all times. At times I have a few hundred dollars from dividends not yet reinvested. We keep just a few months living expenses in a joint checking account.
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arsenalfan
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Re: Do you keep extra money available for investing

Post by arsenalfan » Wed May 24, 2017 10:27 am

No. I autoinvest.
If there is a monthly surplus, I look at AA in Personal Capital and buy what I am short in.

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dratkinson
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Re: Do you keep extra money available for investing

Post by dratkinson » Wed May 24, 2017 4:47 pm

No. Yes.

I consider bonds in taxable to be: part of my AA, last/largest formal tier of my EFs, home project/new car fund, and dry power.

But lately, the EF/project duties have taken center stage, so haven't wanted to press my luck.
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Joe1Joe
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Re: Do you keep extra money available for investing

Post by Joe1Joe » Wed May 24, 2017 5:50 pm

livesoft wrote:You know, that's what your bond allocation is for. Bonds were UP about half a percent on last week's dump, so you made more than cash before you exchanged into equities and watched those equities POP.

And then you rebalanced back into bonds on Friday.
I hear this said a lot and I have a few questions about it during a bear market. I was not in the market in 2000 or 2008-2009, I started my career in 2011.

1. Would the practice be to slowly, maybe monthly, take a portion of your bond fund and put it into stocks during a pullback? How would you know how much to shift? Is it keeping to you IPS? ie making sure your portfolio is 80 monthly or quarterly or whichever you have chosen?
2. Wouldnt you potentially be missing out on bond gains? Depending on the how the market performs of course, but bonds performed well during the great recession. If you rebalanced too early you missed out on buying stocks low and bond fund prices increasing.

I guess I'm just looking for guidance on what the BH approach to this is.

dbr
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Re: Do you keep extra money available for investing

Post by dbr » Wed May 24, 2017 6:40 pm

Joe1Joe wrote:
livesoft wrote:You know, that's what your bond allocation is for. Bonds were UP about half a percent on last week's dump, so you made more than cash before you exchanged into equities and watched those equities POP.

And then you rebalanced back into bonds on Friday.
I hear this said a lot and I have a few questions about it during a bear market. I was not in the market in 2000 or 2008-2009, I started my career in 2011.

1. Would the practice be to slowly, maybe monthly, take a portion of your bond fund and put it into stocks during a pullback? How would you know how much to shift? Is it keeping to you IPS? ie making sure your portfolio is 80 monthly or quarterly or whichever you have chosen?
2. Wouldnt you potentially be missing out on bond gains? Depending on the how the market performs of course, but bonds performed well during the great recession. If you rebalanced too early you missed out on buying stocks low and bond fund prices increasing.

I guess I'm just looking for guidance on what the BH approach to this is.
A theoretically pure approach would be to do what you are always supposed to do, which is follow your investment policy statement. So that statement should contain a paragraph on rebalancing. A good example would be to rebalance to target whenever the asset allocation between stocks and bonds exceeds 5 percentage points from target. In that case if one starts at 70/30 and stocks fall to where things are 65/35, one sells bonds and buys stocks. As stocks continue to fall one repeats. You can run various numerical examples for various target allocations and hypthetical market declines and observe the range of final effects. You can also trace the result of engaging in the reverse process as stocks recover.

At the time of the 2008 downturn it became somewhat evident on the forum that some people might advocate a rebalancing policy of balance out of stocks when the market is climbing but not into stocks when there is a market decline. Larry Swedroe might have been one advocate of that. Probably this approach would be suggested for those with significant wealth and in retirement and the plan in the above paragraph for accumulators. A criticism of the never rebalance into a decline is that anyone who needs to do that should rather have had less allocated to stocks in the first place. That seems logically valid. On the other hand, an effect of not rebalancing into a decline is that the portfolio effectively becomes more conservative by itself, so the two ideas seem to merge a little bit. I am not aware of anyone providing a quantitative analysis of the alternatives and their effect.

To repeat, however, the essence is the BH way is to have a plan and stick to it.

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celia
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Re: Do you keep extra money available for investing?

Post by celia » Wed May 24, 2017 6:46 pm

Yes.
dbr wrote:To repeat, however, the essence is the BH way is to have a plan and stick to it.
I agree. :D
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livesoft
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Re: Do you keep extra money available for investing

Post by livesoft » Wed May 24, 2017 7:02 pm

Joe1Joe wrote:I guess I'm just looking for guidance on what the BH approach to this is.
I don't know what the BH approach would be, but I have the following approach:

Whenever there is a livesoft-defined RBD, then I will buy equities. I will have to sell bond fund shares to buy equities because I do not have any cash.

I will sell equities when they exceed a specific percentage (a top trigger point) of my total portfolio, but I will sell down to the top trigger point.

This doesn't cover every possibility. For example, if equities slowly go down with an RBD occurring, then I will buy when they go below a specific percentage (a lower trigger point) of my total portfolio,, but I will buy up to the nominal asset allocation.

Also, if a bond ETF goes up by 0.5% in one day, then I will sell bonds. Or if a bond fund goes down by 0.5% in one day, then I will buy bond funds.

That still doesn't cover every possibility, does it?
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remomnyc
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Re: Do you keep extra money available for investing

Post by remomnyc » Thu May 25, 2017 12:38 pm

We keep enough cash in 1.0% savings accounts to make a 20% deposit if we ever find another place to buy. If stocks go on sale before we find a place to buy, we will be using it to invest.

MrNewEngland
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Re: Do you keep extra money available for investing

Post by MrNewEngland » Thu May 25, 2017 1:03 pm

I don't automatically reinvest the dividends in my IRA, so I let those and my weekly contributions build up a little until there's a dip. It ends up being pretty insignificant but I kinda like doing it so that's my strategy. My 457/401k are not touched/managed.

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